Laptops are evolving—and forcing the rest of the computer industry to change

IT WAS like waiting for Godot: in the end, the great man did not come. The crowd at Apple's jamboree in San Francisco this week was visibly disappointed when Steve Jobs, the computer-maker's legendary chief executive, did not even put in a brief appearance after a six-month medical leave. But another no-show was perhaps more important. Proving many techno-pundits wrong, Apple did not present a “tablet”—a pared-down computer in both size and abilities, with a touch screen. Had it done so, it might have helped settle a question that has preoccupied the personal computer (PC) industry for some time: are netbooks—cheap and basic laptops that are flying off the shelves—just a fad, or the future?

The answer is probably both, as an “iPad”, or whatever Apple's device may be called, would have demonstrated. Netbooks are already being supplanted by a plethora of new gadgets, including tablets and increasingly computer-like mobile phones (see article). But the idea they embody, that a near-permanent connection to the internet permits simpler technology, is already changing the economics of the PC business.

Simple, low-cost laptops are not a new idea. There were several abortive attempts to make them in the 1990s, but big computer-makers soon dropped them for fear that they might undermine sales of traditional laptops. In 2005 a charity called One Laptop Per Child designed an ultra-cheap laptop for the developing world. That inspired Asus, a Taiwanese PC-maker, to develop one of its own, called the Eee PC, which it started selling in late 2007 for $250.

The timing was perfect. A few months later, the credit crunch hit. At the same time, Intel started selling its cheap and power-saving new processor chip, called Atom. By the end of 2008, Asus had sold nearly 5m Eees and all its rivals had jumped on the bandwagon. In total, 21m netbooks will ship this year, almost twice the number in 2008 and more than 15% of the entire market for laptops, according to Gartner, a market-research firm.

Yet as netbooks have become more popular, many of them have also become more sophisticated. Asus's first Eee PC was a puny device with a screen measuring only seven inches (18 centimetres) diagonally, a midget keyboard and flash memory instead of a hard disk. It also ran Linux, a free operating system. But consumers in the rich world wanted more. As a result, most of the new devices on display in early June at Computex, a trade show in Taipei, boasted at least ten-inch screens, full-size keyboards and sizeable hard disks, and they ran Windows XP, an old version of Microsoft's flagship operating system. Many models now go for $600 a pop.

Other gadgets on display at Computex included prototypes of “mobile internet devices”, which sit somewhere between smart-phones and netbooks, “net-tops” (tiny desktops) and “all-in-ones” with touch-screens instead of keyboards, to hang on the fridge, for instance. “The PC industry will ultimately mirror the car industry,” says Ranjit Atwal, an analyst at Gartner. “There will be something for every need and every taste.”

Yet although netbooks have acquired many frills and mutated into new forms, the theory behind them endures: computers do not need to be stuffed with the latest whizz-bang technology if they have a high-speed connection to the “cloud” of services available online. At Computex firms showed devices equipped with WiMAX, a new wireless technology that allows for fast, ubiquitous wireless connections.

It is this combination of connectivity and cloud computing that makes netbooks and their successors so disruptive. Some mobile-network operators now throw in free netbooks if subscribers sign up for a mobile-broadband contract. This will put further pressure on prices, since mobile operators have more bargaining power than individual consumers, although it also opens a huge new distribution channel for computer-makers.

More important, netbooks and similar devices could weaken Microsoft and Intel, which have so far dominated the PC industry and extracted most of the profits. To keep Linux off most netbooks, Microsoft has had to discount Windows XP from $40-45 per copy to $10-15. This, along with the general weakness of the PC market, explains why its earnings dropped almost a third in the first quarter of this year. To make more money from netbooks, it will offer a minimalist “starter” edition of Windows 7, the new version of its operating system due out in October.

Intel, by contrast, has so far mainly benefited from the netbook craze, which has created a huge market for its Atom chip. The firm insists this has neither cannibalised sales of its other chips as much as feared nor put pressure on its lofty margins, since Atom costs less to make. Still, just as with Linux, there is a credible alternative to Atom: processors based on designs by ARM, a British firm, which already power most of the world's mobile phones. Several Taiwanese PC-makers are working on a netbook-like gadget that would be powered by an ARM chip and run Android, a variety of Linux developed by Google for use on smart-phones.

At Computex, Acer announced that it would use Android together with an Intel chip. Other firms are expected to follow suit. Intel is also pushing another version of Linux, called Moblin. Its long partnership with Microsoft notwithstanding, Intel does not seem to care what operating system netbooks use, provided they contain the firm's chips.

Linux may also prove popular for tablets, a market that Apple is likely to energise when it finally launches its much-awaited new device (though any Apple tablet will run its own operating system). The reason it did not happen this week, some say, was that either the tablet or Mr Jobs, who would like to present it personally, is not yet ready for action. Unlike Godot, Mr Jobs and the new gadget are likely to appear eventually—probably in time for the holiday season.